Nvidia (NVDA) Fell While the Market Rallied. Here Is What Happened the Last Times It Did That

The S&P 500 rose 2.3% on Monday, winning back part of last week's losses. The biggest stock in the index missed the party. Nvidia fell 4.3%, after dropping as much as 8.8% at one point.

The reason had nothing to do with chips. On Sunday, Nvidia's board said it was opening an independent investigation "in light of recent reporting that founder and CEO Jensen Huang has been the target of a foreign intelligence effort." The board said it had "no reason to believe that either national security or NVIDIA secrets were compromised." It added that Huang was cooperating and that it had confidence in him.

Say you own Nvidia, as many Americans do through index funds and retirement accounts. Monday is a familiar kind of day for this stock: the market rises and Nvidia falls on news about Nvidia alone. We counted every such day since 1999 and followed the money through two of them.

The stock had already fallen 22% from its Oct. 6 record before Monday, including a 9.3% drop in Thursday's chip crash. Here is what happened to people who held on the last times Nvidia fell by itself.

Read more: NVIDIA (NVDA) company research

The holder who lost a quarter more

On Nov. 15, 2018, Nvidia reported record quarterly sales of $3.18 billion and then told investors the next quarter would bring only $2.70 billion. The company said its results reflected "excess channel inventory post the crypto-currency boom."

The next day the stock fell 18.8% while the S&P 500 rose 0.2%. Imagine an investor who held $10,000 of Nvidia at that day's close and decided to wait it out.

Five weeks later, on Christmas Eve, the stake was worth $7,736. The investor had lost almost a quarter of what was left after a drop that already looked like the bottom.

It was back to $10,000 on March 13, 2019, less than four months after the warning. A year after the drop it was worth $12,702. Two years after, $32,872. At Friday's close, that $10,000 stake was worth $459,369.

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Most company-only drops went this way

We found 29 days since 1999 when Nvidia fell 5% or more while the S&P 500 finished flat or higher, counting drops less than three months apart as one. A holder of $10,000 on those days typically saw the stake fall to $7,736 before it recovered, and 21 of the 29 holders sat through a further loss of at least 10%.

Most waits were short. In 23 of the 29 cases the stake was back to $10,000 within a year, and in 20 it was higher a year later. The typical stake a year on was worth $15,741. The exceptions clustered in two stretches: the dot-com bust of 2001 and 2002, and the financial crisis of 2008.

The holder who waited a year

The worst company-only drop came on July 3, 2008. The evening before, Nvidia had told the Securities and Exchange Commission it would take a charge of $150 million to $200 million. Chips in some notebook computers were "failing in the field at higher than normal rates," the filing said.

The stock fell 30.7% that day. The S&P 500 rose 0.1%. A $10,000 stake at that close was worth $4,724 by Nov. 20, 2008, as the financial crisis piled onto the company's own trouble.

That holder did not see $10,000 again until July 23, 2009, more than a year later. Two years after the drop the stake was still worth only $8,118. The long run was kinder: at Friday's close it was worth $6.5 million.

The difference between the two waits was the business underneath. After the 2008 warning, Nvidia's sales for the fiscal year fell 16% to $3.4 billion, and the final quarter's sales fell 60%. After the 2018 warning, sales for the following fiscal year fell 7%, to $10.92 billion, and the stock had recovered before the year was out.

Which one is this?

Both past drops began with Nvidia warning about its own products and sales. Sunday's statement did not mention the business at all.

The business itself is on a different footing from either precedent. In August, Nvidia reported quarterly sales of $96.2 billion, up 106% from a year earlier, and forecast $108 billion for the quarter that ended Oct. 25. That report is due on Tuesday, Nov. 17.

The stock did not wait for Monday's open to react. On trade.xyz, an exchange that trades a contract tracking Nvidia around the clock, the price fell from $187.52 to $183.37 in the hour after 3 p.m. ET on Sunday, about 18 hours before the opening bell. The exchange is closed to US residents.

There is a second weight on the stock that the investigation did not cause. Nvidia fell 9.3% on Thursday with the rest of the chip industry, when investors worried that the new Congress could slow the construction of AI data centers, CNBC reported.

What to watch

The deciding fact in both precedents was the next sales report. Nvidia's arrives on Nov. 17, with the company's own $108 billion forecast as the bar. The board has promised further updates on its inquiry, and any change to its "no reason to believe" line would matter more than any one day's trading.

Past drops are not a forecast for this one, and none of this is advice to buy, sell or hold.

How we did it

Prices are Yahoo Finance daily closes for Nvidia, adjusted for splits and dividends, and for the S&P 500 index, through Friday, Nov. 6. A company-only drop is a day Nvidia fell 5% or more while the S&P 500 finished unchanged or higher. Drops less than 60 trading days apart count as one, dated to the first.

Each $10,000 path runs from that day's close through Friday, and "a year later" means 252 trading days. Sales figures are from Nvidia's results releases and its July 2, 2008 filing with the SEC. Monday's index and Nvidia moves are that day's closing prices from Yahoo Finance.

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